The federal government faces an uphill task to pull the economy out of recession as the third quarter gross domestic product growth rate gives a faint hope of quick recovery
When the National Bureau of Statistics, NBS, announced its report of the gross domestic product, GDP, growth rate for the second quarter of 2016, which was in the negative zone, officials of the federal government, particularly Kemi Adeosun, minster of finance, were quick to douse the fears of Nigerians. As it turned out, that was the second consecutive negative GDP growth for the year, an indication that the economy was officially in recession. But a confident Adeosun postulated that the third quarter GDP result would be positive and by the time the report was ready, the economy would be on its way out of recession.
However, that was not the case with the third quarter GDP growth rate recently released. The NBS said the GDP, in real terms, declined by -2.24 per cent (year-on-year) in real terms in the third quarter of 2016. The report stated that the figure was lower by 0.18 per cent points from the growth recorded in the preceding quarter and 5.08 per cent points lower than the growth recorded in the corresponding quarter of 2015.
The state of the Nigerian economy is better understood from the NBS report on the contributions of the oil and non-oil sectors to GDP. The report stated that during the period under review, oil production, according to NNPC, averaged 1.63 million barrels per day, Mbps, lower from the production recorded in the second quarter of 2016. It stated that oil production was also lower relative to the corresponding quarter in 2015 by 0.54 million barrels per day when output was recorded at 2.17 Mbps.
This now poses a serious challenge to President Muhammadu Buhari and his economic team. Experts insist that unless certain reviews were made to the existing policies, the economy would record another negative growth in the fourth quarter of this year. For instance Bismarck Rewane, chief executive officer, Financial Derivatives Company Limited, said, “The policies have to complement one another. The fiscal policy is moving in the right direction, but it is not enough. We need increased stimulus and increased injection. But we cannot do this with the current level of interest rates. Therefore, something has to happen to bring the interest rates down. The monetary policy has to be consistent with the fiscal policy, or else we will continue to have a contraction. And more than anything else, the foreign exchange market has to be reformed. The foreign exchange market, as it is currently constituted, is a bridge to nowhere.”
He noted that although the economic management team had done its best, some decisions were also taken very late. “To be honest, the government has done as best it could. But it could have done better in the sense that certain decisions were late. Certain decisions and actions were inadequate. They were right policies, but the dose of the medication and the timing were not aligned,” Rewane added.
Pat Utomi, the professor of economics, said it was obvious that the economy was in a crisis and there was an urgent need for all stakeholders to come together to chart ways out of the present predicament. According to him, “We are dealing with a complex problem. We know generally they are underperforming. I don’t think we are having a quality public conversation. At this time that this country is in a major national crisis, we are in a state worse than war. What we need is a war cabinet in which we all as Nigerians come together to discuss what we can do to reconstruct the falling walls of Nigeria. There has been a reluctance to invest. Investors have generally held back. If business confidence is negative, obviously there will be a slowdown. Contrary to suggestions by government officials that we will be out of recession by December, the indicators that I am hearing about suggest that things will even get worse.”
As damning as the third quarter GDP growth rate is perceived by many, it gives some sense of hope as the non-oil sector, which recorded negative growth in the first two-quarters of 2016, grew by 0.03 percent in the third quarter. The agriculture, metal ore mining, fishing, textile production, and health and human services, among others experienced positive growth. The agriculture sector’s growth rate of 4.54 per cent, 1.07 per cent increase over the previous quarter. The sector contributed 28.65 per cent, in real terms, to the GDP in the third quarter, a 6.10 per cent increase from the preceding quarter. Indeed, Moody’s, an international credit rating agency, recently observed that despite the current recession, the Nigerian economy could grow by 2.5 per cent in 2017.
At the annual Bankers’ Night organized by the Chartered Institute of Bankers of Nigeria, CIBN, in Lagos recently, many attendees noted that the economic challenges besetting Nigeria were not peculiar to it and expressed the hope that the nation would soon overcome them. Segun Ajibola, president, CIBN, said, “There is no gainsaying that the year 2016 has been awash with mixed feelings, both at the global level and the domestic space…
Read the concluding part in the magazine.